@Risk

A few days ago, I wrote a post about how corporations are reinventing the way they look at risk. Now there’s more new research that reinforces the point, particularly with regard to supply chains.

According to a report released by the Economist Intelligence Unit and sponsored by Zurich Switzerland-based insurer ACE, today’s risk management executives now know that protecting their company’s supply chain is important, but even so, many are struggling to find ways to effectively manage the risks involved.

The report, titled “Managing Supply-Chain Risk for Reward,” summarizes the results of a poll of 500 global executives with responsibility for risk management.

Here are a few key findings:

• Two thirds of those surveyed said they were initiating risk assessments of key suppliers.

• Over half said they were working to improve collaboration with their partners and suppliers.

• The majority of respondents were affected by rising input costs and swings in energy prices.

• A third reported that the insolvency of partners or suppliers had caused disruption.

• 62 percent cited the inability to predict future demand for their products as a major issue.

• 59 percent said they had been adversely affected by exchange rate fluctuations. What’s more, nearly 40 percent of respondents saw continuing unfavorable exchange rates as the key concern for their supply-chains in 2010.

• Looking ahead, respondents also cited other supply chain challenges, including declining customer confidence, the introduction of protectionist measures by governments, and further supplier insolvencies.

• The survey showed that improving supply chain efficiency and cost cutting are additional priorities for 2010. 57 percent of respondents reported that they had negotiated lower prices from suppliers over the last year, and over a third said they have sought increased efficiency from their logistics and increased their reliance on outsourcing. More than a third planned to move from single to multiple suppliers.

It’s great to see that companies are beginning to recognize supply chain risk management –and especially supplier collaboration –as a strategic imperative. Is your company part of this growing trend? It needs to be if you want to remain competitive in today’s complex global marketplace.

As Phil Wall, Senior Account Engineer from ACE, sums it up:

“…the findings of this latest EIU study are encouraging.  It’s good to see many companies actively working on strategies to boost the resilience of their supply-chains and make them more cost-effective and efficient. However, it’s not all good news and we are concerned that many businesses aren’t considering supply-chain risk as strategically important and they aren’t developing the expertise to deal with it. We would urge all companies to take this vital area of their business seriously; supply chain risks should not be ignored.”